Valuation of Paytm owner may hit $16 billion

Paytm parent One97 Communications is in talks with investors from US and China to sell a secondary of existing employees shares and small shareholders like MediaTekMadhav Chanchani | ET Bureau | Updated: October 11, 2018, 09:03 IST

One97 Communications, which owns India’s largest payments player Paytm, could see its valuation more than double from last year to $16 billion as it has started seeing a surge in investor interest after the recent infusion of $300 million by Berkshire Hathaway, according to investors and bankers familiar with the development.

The company is in talks with investors from US and China to sell a secondary of existing employees shares and small shareholders like MediaTek, according to these sources.

“The value of the transaction is still being finalised but could range between $100-200 million,” said one of the people cited above.

Blackstone, one of the world’s largest private equity firms, and US-based hedge fund Dragoneer Investment Group, which recently scooped up stake in IPO bound ride-hailing giant Uber, are in talks with the company.

Several Chinese investment firms are also looking at an investment, said these sources. Besides employee shares, these firms may also buy also some stake held by Taiwanese chipmaker MediaTek.

Email queries sent to Paytm and Dragoneer did not elicit a response at the time of filing this article. A Blackstone spokesperson declined to comment.

Dragoneer, which manages over $4 billion, has backed companies like Alibaba and Facebook. In India, it had picked up a stake in Flipkart at $1.6 billion in 2013 and sold it when Walmart acquired 77% stake in the company at a valuation of $22 billion recently.

Blackstone, which has $439 billion in assets under management, has backed several outsourcing and IT services companies like Intelenet and Mphasis in India. It also has stake in FINO, which also has a payment bank license, which according to reports it is now planning to sell.

The development could mark a significant jump in the valuation of Vijay Shekhar Sharma-promoted Paytm from around $7 billion when it closed a $1.4 billion round from SoftBank Vision Fund in late 2017.

It would also be an over 50% increase in $10 billion valuation since it raised money from Berkshire Hathaway, which was the first investment by the Warren Buffet-owned company in a private technology company in the world.

The interest of global investors has increased significantly in the company since Berkshire infusion. “I have unsolicited requests from investors in the US and Europe sending me their profiles and asking if I can help them get some shares in the in the company,” said an investment banker. This would be the third major secondary for ESOPs (employee stock ownership plans) being executed by Paytm in the last two years.

In March 2017, around 47 employees at the Noida-based company sold shares worth about Rs 100 crore when it was valued at $4.8 billion. Then earlier this year it saw share sale worth Rs 300 crore to investors including hedge fund Discovery Capital which created about two dozen dollar millionaires.

Paytm has been diversifying and strengthening investor base as it looks to cement market leadership against Flipkart-backed PhonePe and Google’s Tez besides potential competition from Facebook-owned WhatsApp and Reliance Jio.

For the next 12 months, Paytm’s target is to double its gross transaction value to $100 billion on an annualised basis. It is also looking to double its merchant base to 16 million.